Gov't Secures First Conviction Under The Securities Regulation Code

26 March 2013

The People of the Philippines, represented by Senior Assistant State Prosecutor PETER L. ONG of the National Prosecution Service ("NPS"), in cooperation with the  Enforcement and Prosecution Division of the Securities and Exchange Commission ("SEC"), secured its first conviction under the Securities Regulation Code ("SRC") since its enactment on 19 July 2000.

In a Decision promulgated on 19 March  2013, Presiding Judge SELMA PALACIO ALARAS of Branch  62 of the Regional Trial Court of Makati City ("RTC-Makati") found FRANCISO O. BORROMEO guilty beyond reasonable doubt of committing seven (7) counts of violation of the SRC, based on Informations filed by the NPS for acts committed between August 1993 to November 2003.

After the Prosecution offered the testimonies of three (3) witnesses, Borromeo, assisted by counsel, withdrew his previous plea of not guilty and, in lieu thereof; pleaded guilty to all seven (7) counts of violation of the SRC, namely: five (5) counts of violation of Section  26 ("Fraudulent Transactions"); one (1) count of violation of Section 49.1 ("Net Capital Rule; Restrictions on Borrowing by Members, Brokers and Dealers"); and one (1) count of violation of Section 52.1 ("Maintaining 2 Sets of Books of Accounts and Records").

The charges filed against Borromeo were in connection with acts and transactions, including the sale and purchase of securities, through the instrumentality of ASIAN CAPITAL EQUITY, INC. ("ACEI"), of  which he was the President.

The five (5) counts , of "Fraudulent Transactions" (violation of Section 26) pertained to his acts of employing "a device, scheme or artifice to defraud clients and the investing public by using ... fictitiousand dummy account[s]... in the buying transactions of securities, to the damage and prejudice of ACEI's clients and the investing public," and fraudulent and deceitful acts of selling and trading shares belonging to clients without the knowledge and consent of, or without delivering the proceeds of the sale to, said clients, to their damage and prejudice.

The one (1) count of violation of Section 49.1 pertained to his act of using his personal loan to augment the reported assets of the ACEI in order to make it appear that ACEI is compliant with net capital requirement (of P5,000,000.00 or 5% of the aggregate indebtedness) under the law when, in truth, it only had P3.5M in assets, to the damage and prejudice of its clients and the investing public.

The one (1) count of violation of Section  52.1 pertained to his act of maintaining two (2) sets of books, one that. contains actual database showing ACEI's negative position, and another containing altered database to project ACEI's positive position, created purposely to comply with the audit requirement of the Philippine Stock Exchange ("PSE") and of the SEC, to the damage and prejudice of ACET and the investing public.

Borromeo was sentenced to pay a total fine of TWO MILLION and ONE HUNDRED THOUSAND PESOS (P2,100,000.00).

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